integrAsian

4. Growth strategies in Asia

Asia’s immense diversity will make it challenging for many firms to maintain a consistent sales strategy across the region.

From a business perspective, approaching Asia as a single region or even a group of sub-regions can be challenging because of its sheer size and diversity. Only a quarter of firms surveyed said they adopt a single sales strategy for all of Asia, 34% of respondents say they have strategies for sub-regions and 41% apply country-specific strategies. Sub-regional strategies are the most popular in Singapore, with 54% of companies in the city state using the approach. This likely reflects Singapore’s role as a hub for ASEAN. Three-in-five Indian firms (60%) say they focus mainly on individual markets in Asia rather than the region. Professional services and manufacturing firms were the most likely to adopt a regional marketing approach at 36% and 28%, respectively, versus only 20% of retail firms.

Haier Group’s international expansion has focused more on identifying niche markets in specific geographies, rather than prioritising regions. “Each country has a different structure, different dynamism and different background, even though revenue-wise they might be similar,” says Haier’s Mr Ito.

Cross-border business in Asia is heavily exposed to economic cycles

Whether companies in Asia use a regional, sub-regional or market-specific strategy, many are highly dependent on cyclical factors to drive cross-border business. When considering what factors would help them generate more international business in Asia, firms polled clearly placed the most weight on macroeconomic conditions, with 90% saying an improving economic backdrop would have a somewhat significant or very significant impact on their international sales. This suggests that regional integration in Asia could accelerate when economic activity picks up, or conversely, may be negatively affected by a sharp slowdown.

Reductions in tariffs, FTAs can boost intra-regional trade

In addition to macroeconomic factors, tariff reductions are seen as having either a significant or very significant impact on cross-border business by 77% of companies regionally. 85% of companies in the manufacturing sector, which are among the most likely to see taxes or duties applied to products they ship internationally, say lower tariffs would have a significant impact on overseas business in Asia.

“The main obstacle (to business expansion in Asia) is the cost, because many export-import regulations are not yet clear,” says Awie Wang, founder of Indonesian shoe designer BNV, which is concentrating on nearby markets like Malaysia, Singapore and Thailand. “With the ASEAN Economic Community, barriers from export-import related costs will decline significantly.”

Creating a lower-cost and more transparent trading and investment environment with the use of free-trade agreements is also a key driver for companies in Asia. Around three quarters of respondents (77%) cited new free trade and investment agreements as either significant or very significant for international sales. Indeed, the results of India’s efforts to conclude more FTAs “will be tangible since we are a global beverages player,” says Tata Global Beverages’ Mr Misra. “(They) are likely to help facilitate investment proposals and eliminate duties on several key products, thus impacting the business positively.”

Having to personalise goods and services for Asian consumers is a challenge

Asia’s growing middle-class populations is a tremendous source of opportunity for many businesses. However, catering to the region’s profound diversity of cultures and levels of development is a formidable undertaking. That Singapore (GDP per capita of US$52,000) is in the same sub-region as Myanmar (GDP per capita of US$1,100) is only one example. “Where parties that come from offshore tend to make the mistake is looking at the region similarly to Europe and the US,” says Optiver’s Mr Weinberg. “What you soon find out is that each jurisdiction has its own … rules, regulations, different tax regimes, different ways that the market structure is set up. That is the burden of trading in Asia, (and) you really have to have people within the business who have expertise in each market.”

Differing stages of development was a commonly cited barrier to achieving a consistent sales strategy across Asia, with 42% of respondents citing it as a very significant factor and 43% as significant. Different consumer preferences were also seen as a big barrier, and as a factor it was cited by 45% of respondents as very significant and 39% as significant. More than half of companies in China (56%), India (53%), Indonesia (69%) and Taiwan (60%) say this is a very significant barrier to maintaining a consistent sales approach.

“Overall the appeal of Asia as an investment destination is still dominated by the growth that the different countries are promising … the integration potential is probably seen as something that promises more for later rather than something that is driving growth at the moment,” says Maarten Wetselaar, Singapore-based executive vice president for Shell Integrated Gas.